MUMBAI The Supreme Court on Tuesday upheld a temporary ban on the sale of large diesel cars in New Delhi to combat toxic smog in India's capital, but postponed hearing an industry appeal on an environmental tax that carmakers say will hit investment.

Delhi's block on new diesel cars has unsettled the industry, its salesmen and investors, who warn the ban and uncertainty surrounding it could derail a tentative recovery in auto sales.

Green groups want to extend the ban to smaller diesel cars and other smog-choked cities in India.

The presiding Supreme Court judge said on Tuesday that the court was considering expanding the ban to diesel cars with engine capacity of less than 2,000 cc - currently not covered - but would first seek industry input on the matter.

The Supreme Court had also been expected to rule on Tuesday on a separate green tax on all diesel cars in the city, but has yet to announce its decision on that levy.

The decision on the tax, critical for automakers such as Mahindra & Mahindra (MAHM.NS), Tata Motors (TAMO.NS) and Toyota Motor Corp that have invested heavily in making cars for diesel-loving Indian consumers, may now be heard next week.

Delhi is one of the world's most polluted cities, with its residents often struggling to breathe in air quality that is worse than in the Chinese capital of Beijing.

India's automakers say they want a comprehensive plan - rather than court-led initiatives - to determine the regulatory structure.